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See below.
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Money Survival Help Q & A
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saving, investing, mortgages, refinancing, first-time home buyer credit, debt, 401(k), Roth
IRA, college tuition, insurance or any money issue, just email us at: info@drpearlenawallace.com
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Email your personal finance questions
to: info@drpearlenawallace.com Dr. Pearlena Wallace, Ph.D., author and personal finance expert will answer selected questions
in this Blog Q & A. She regrets that she cannot answer all questions individually. But Dr. Wallace will try
to select questions based on how representative they are of other readers problems. |
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Q.
My brother has bad credit and he asked me to cosign for a car. What are the drawbacks of cosigning a loan?
Ray B., Jackson, TN A. There are pitfalls to cosigning a loan. If your brother defaults on the loan, you are liable for the loan. The loan appears on your credit report and the lender can sue you to collect the debt. So, cosigning on a loan is almost always a bad idea. Q.
I’m 41. My husband and I have good jobs but we have no savings. We bring home $5,700 a month, and we can
barely pay our bills let alone save anything. What can you suggest to help us start saving?
Rhea F., Spokane, WA A. When you sit down to pay your bills each
month, the first check you write should be to yourself. Open a separate account at your bank or a mutual fund and commit
to an amount to deposit each month. You have to start saving, even if you think you can’t afford it. To
come up with the extra cash, this means you will have to cut back on unnecessary spending such as, dining out, vacations,
shopping, premium cable and telephone service. If we learn only one thing from this recession, it should be that everyone
needs an emergency savings fund that covers at least 6 months of living expenses. Think of what might happen if
one of you were to lose your job. Q.
Please explain who qualifies for the $8,000 first-time home buyer credit. I keep hearing that you may qualify
even if you have owned a home before. Is this true? Shauna G., Athens, GA A.
Yes, you make qualify even though you have previously owned a home. Here’s the scoop: A "first-time
home buyer" is a buyer who has not owned a principal residence during the three-years prior to the purchase. To
qualify for the $8,000 tax credit, your purchase has to be made (transaction closed) on or after January 1, 2009 and before
December 1, 2009. Congress is curently working on a bill to extend the timeline for this tax credit. Stay
tuned for updates. Q.
I have been working for the same company for 23 years, but I got a notice this week that my job would end in two weeks.
I have about $67,000 in my 401(k) plan. I was told that I could leave the account with my company or take the money
with me. What should I do? Peter M., Fremont, OH A.
Listen carefully to what I’m about to say. Do not leave your 401(k) with your company. When you leave the company,
have your account rolled over into an IRA. For example, you could choose to have your 401(k) rolled over into a mutual
fund IRA. In this case you would contact the mutual fund company and request the forms to have your account transferred
directly from your employer to the mutual fund. You don’t want the money to touch your hands because you could
get hit with a double whammy – taxes and penalties. Q. My
parents have used up all of their savings and need some way to supplement their small Social Security income. How does
a reverse mortgage work? Beth L., NY A. Reverse mortgages are available to homeowners who are age 62 or older. Typically, these loans don’t have to be repaid as long as you live in the home. But the loan must be repaid in full when the last owner dies, sells the home, or permanently move out. You may choose a lump-sum or monthly payment. With misleading sales pitches, high fees, and interest rates, these loans can be murky. So educate yourself first and use these type loans as a last resort. Q. When the stock market dropped, I panicked and sold every stock in my account. Now that the market seems to be heating up, I want to buy more stocks. Any suggestions for a novice investor? Kevin S., Springfield, MO A.
Selling your stocks because the market dropped is the wrong reason to sell. You want to evaluate the performance of
your individual stocks and then dump those that aren’t meeting your expectation or objective. I suggest you consider
investing a portion of your portfolio in index funds. Investing in a broad-market index fund instead of buying individual
stocks is a wise choice, even for seasoned investors. When you invest in an index fund, such as the S&P
500 fund, you automatically get exposure to hundreds of different stocks – giving you a well diversified portfolio. Choose
index funds with low fees, like those from Vanguard. Fees matter because they can take a big bite
out of your returns.
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RELEASE OF LIABILITY: Our Money Makeover and Money Q & A are presented without warranty of any kind. Neither Dr. Pearlena Wallace nor the money experts, affiliates, agents for any given Money Makeover and Money Q & A shall be held responsible for any damages relating to any action taken, or not taken as a result of the advice given in the Money Makeover and Money Q and A. Those using this website are solely responsible for their own financial and investment decisions. The information provided in any Money Makeover and Money Q & A is for informational purposes only, and you should consult your own financial adviser, legal or tax professional